If only life’s long-term decisions were as easy as the short-term ones. You might spend 30 seconds or less deciding if one donut for breakfast is enough, or if you can stay functional all day on one cup of coffee. But deciding whether your 401(k) alone can fund retirement takes slightly more brainpower. You might want to grab that donut and coffee now so you’re ready to dive into the details.

## The best-case scenario

Let’s start with good news. If you’re under 30, you can absolutely fund a comfortable retirement with a 401(k). To do it, set your contribution rate at 10% to 15% of your income and invest primarily in low-cost index funds. Stay at your job until you’re fully vested so you make full use of your employer-matching contributions. Also plan on increasing your contribution rate every time you get a raise. Stick with that program for 35 years and you’ll have a sizable nest egg by the time retirement rolls around.

Here’s how the numbers look. The average salary for workers aged 25 to 34 years in the U.S. is $46,852. Let’s say you contribute 10% from your paycheck to start and your employer matches up to 5%. That puts your total monthly contributions at about $585.

If your account grows at 6% annually on average after inflation and fees, you’ll have about $786,000 saved after 35 years. And that’s without increasing your contributions at all. You would easily add much more to that balance with a one-point increase to your contribution rate annually.

The growth of 6% in this scenario does deserve some explanation. Long-term, the average annual growth of the stock market is about 7% after inflation. If you invest in a broad market fund, like an **S&P 500** index fund, it’s reasonable to plan for that 7% growth over longer periods of time.

However, you are paying investment fees and, probably, administrative fees within your 401(k). Those fees reduce your investments’ returns. For the sake of being conservative, I trimmed back the 7% market growth rate to 6% — which would account for up to 1% in fees.

## When it’s workable, but not ideal

If you haven’t started saving yet, the retirement picture gets progressively less optimistic after your 30th birthday. You’re probably earning more, but you have a shorter timeline to grow your investments. If we shave only five years off the earlier scenario, the same $585 monthly contribution earning 6% only grows to about $558,000. That means those final five years are really where the magic happens; your balance increases by more than $200,000 even though your contributions in that time total only $35,100.

To make up for the shorter timeline, your only option is to raise your contribution. Specifically, to reach the $786,000 balance in 30 years instead of 35, you have to contribute nearly $825 monthly. If the employer match doesn’t change, that’s an extra $240 out of your pocket each month — or $86,400 cumulatively over 30 years.

If you can afford that contribution, your 401(k) can still handle the job. You’d be well within the IRS’s maximum annual contribution cap. In 2021, for example, everyone under age 50 can contribute up to $19,500 to a 401(k), or $58,000 including employer contributions.

## When your 401(k) just isn’t enough

Your 401(k) may fall short if you’ve already celebrated your 50th birthday without much savings to show for it. The challenge you’ll face is that annual contribution cap. After your 50th birthday, you can make catch-up contributions, which will help. In 2021, the catch-up contributions are $6,500. That increases your contribution limit to $26,000 annually.

While $26,000 sounds like a lot to save in a year, it’s often not enough for older savers. You have two factors working against you after 50. One, the investment timeline is very short, which limits your earnings potential. And two, as you near retirement, you need to start insulating your wealth from normal market volatility.

Let’s say you earn an average salary of $60,000 at age 50, and your employer matches 5%, or $3,000. With your maximum contribution of $26,000, you are saving $29,000 annually in total or about $2,400 monthly. That monthly contribution would grow to about $676,000 after 15 years — if you can keep that 6% growth rate.

The problem here is that planning for market-average growth is less reliable when you’re looking at periods shorter than 20 years. In any one year, the stock market might be up or down by double digits. If a down year happens just as you are about to retire, it would temporarily wipe out years of growth.

Most investors manage for that scenario by investing more conservatively. This, unfortunately, also lowers your return expectations and your projected balance at retirement. If you realize 5% growth instead of 6%, your balance after 15 years with those max contributions would be about $50,000 less.

## The best course of action

No matter how old you are, the best way to improve your retirement readiness is to extend your investment timeline. There are only two ways to do that. You can save more today than you did yesterday, or you can delay retirement.

You can’t predict the future of your health or your career, however. So the more reliable option — by a long shot — is to save more now. That means your next move, after you polish off that donut, is to log into your 401(k) and raise your contribution rate.